Groupon Announces Fourth Quarter and Fiscal Year 2012 Results

Fourth quarter operating loss of $12.9 million, compared with an
operating loss of $15.0 million in fourth quarter 2011

Fourth quarter GAAP loss per share of $0.12, including $0.07 loss
per share from a non-operating item, compared with a loss per share of
$0.12 in fourth quarter 2011

Full year 2012 gross billings grew 35% to $5.38 billion, revenue
increased 45% to $2.33 billion, and operating income of $98.7 million
compared to a loss of $233.4 million in 2011

CHICAGO--(BUSINESS WIRE)--
Groupon, Inc. (NASDAQ: GRPN) today announced financial results for the
quarter and fiscal year ended December 31, 2012.

Gross billings, which reflect the total dollar value of customer
purchases of goods and services, excluding any applicable taxes and net
of estimated refunds, increased 24% year-over-year to $1.52 billion in
the fourth quarter 2012, compared with $1.23 billion in the fourth
quarter 2011. Excluding the $21.0 million unfavorable impact from
year-over-year changes in foreign exchange rates, gross billings growth
was 25% compared with fourth quarter 2011.

Revenue increased 30% year-over-year to $638.3 million in the fourth
quarter 2012, compared with $492.2 million in the fourth quarter 2011.
Excluding the $7.7 million unfavorable impact from year-over-year
changes in foreign exchange rates, revenue growth was 31% compared with
fourth quarter 2011. Growth was driven by an increase in direct revenue,
which grew 1549% year-over-year to $225.2 million in the fourth quarter
2012, compared with $13.7 million in the fourth quarter 2011.

Operating loss was $12.9 million in the fourth quarter 2012, including
stock-based compensation and acquisition-related expenses of $26.6
million, and depreciation and amortization of $16.0 million. This
compares with an operating loss of $15.0 million in the fourth quarter
2011, which included stock-based compensation and acquisition-related
expenses of $32.9 million, and depreciation and amortization of $9.3
million. Year-over-year changes in foreign exchange rates had a $0.1
million favorable impact on operating results.

"Record billings growth this quarter is a clear signal that customers
love Groupons," said Andrew Mason, CEO of Groupon. "We will continue to
invest in growth through 2013 as we see new opportunities to give our
customers what they want."

Operating cash flow decreased 61% year-over-year to $65.7 million,
compared with $169.1 million in the fourth quarter 2011. Free cash flow,
a non-GAAP financial measure calculated as operating cash flow less
capital expenditures, decreased 83% year-over-year to $25.7 million,
compared with $155.1 million in the fourth quarter 2011. At the end of
the quarter, Groupon had $1.2 billion in cash and cash equivalents and
no long-term borrowings.

Fourth quarter 2012 net loss attributable to common stockholders was
$81.1 million, or $0.12 per share, reflecting stock-based compensation
and acquisition-related expenses of $26.6 million and share count of
655.7 million. Fourth quarter 2012 results included a pre-tax
non-operating loss of $50.6 million ($45.5 million after tax) related to
the impairment of a cost method investment in China.

Net loss attributable to common stockholders increased by $15.7 million
year-over-year, from a loss of $65.4 million, or $0.12 per share in the
fourth quarter 2011, including stock-based compensation and
acquisition-related expenses of $32.9 million.

Revenue increased 45% year-over-year to $2.33 billion in 2012, compared
with $1.61 billion in 2011. Excluding the $74.1 million unfavorable
impact from year-over-year changes in foreign exchange rates, revenue
growth was 50% compared with 2011. Growth was driven by an increase in
direct revenue, which grew 2083% to $454.7 million in 2012, compared
with $20.8 million in 2011.

Operating income was $98.7 million in 2012, including stock-based
compensation and acquisition-related expenses of $105.0 million, and
depreciation and amortization of $55.8 million. This compares with an
operating loss of $233.4 million in 2011, which included stock-based
compensation and acquisition-related expenses of $89.1 million, and
depreciation and amortization of $32.1 million. Year-over-year changes
in foreign exchange rates had a $7.4 million unfavorable impact on
operating income.

Full year 2012 net loss attributable to common stockholders was $67.4
million, or $0.10 per share, reflecting stock-based compensation and
acquisition-related expenses of $105.0 million and share count of 650.2
million.

Net loss attributable to common stockholders improved by $306.1 million
year-over-year, from a loss of $373.5 million, or $1.03 per share in
2011, including stock-based compensation and acquisition-related
expenses of $89.1 million.

Groupon, Inc.

Summary Consolidated and Segment Results

(dollars in thousands, except share and per share data)

(unaudited)

Three Months Ended

Y/Y %

Year Ended

Y/Y %

December 31,

Growth

December 31,

Growth

2012

2011

Y/Y %Growth

FX Effect (2)

excludingFX(2)

2012

2011

Y/Y %Growth

FX Effect (2)

excludingFX(2)

Gross Billings (1)

North America

$

718,952

$

475,807

51.1

%

$

(2,569

)

51.6

%

$

2,373,153

$

1,561,927

51.9

%

$

(2,780

)

52.1

%

International

801,500

755,061

6.2

%

(18,451

)

8.6

%

3,007,031

2,423,574

24.1

%

(180,739

)

31.5

%

Consolidated Billings

$

1,520,452

$

1,230,868

23.5

%

$

(21,020

)

25.2

%

$

5,380,184

$

3,985,501

35.0

%

$

(183,519

)

39.6

%

Revenue

North America

$

375,351

$

179,638

108.9

%

$

(1,082

)

109.6

%

$

1,165,700

$

634,980

83.6

%

$

(1,156

)

83.8

%

International

262,951

312,526

(15.9

)

%

(6,629

)

(13.7

)

%

1,168,772

975,450

19.8

%

(72,960

)

27.3

%

Consolidated revenue

$

638,302

$

492,164

29.7

%

$

(7,711

)

31.3

%

$

2,334,472

$

1,610,430

45.0

%

$

(74,116

)

49.6

%

Operating (loss) income

$

(12,861

)

$

(14,972

)

14.1

%

$

135

13.2

%

$

98,701

$

(233,386

)

N/A

$

(7,401

)

N/A

Net loss attributable to common stockholders

$

(81,089

)

$

(65,379

)

(24.0

)

%

$

1,102

(25.7

)

%

$

(67,377

)

$

(373,494

)

82.0

%

$

(9,283

)

84.4

%

Net loss per share

Basic

$

(0.12

)

$

(0.12

)

$

(0.10

)

$

(1.03

)

Diluted

$

(0.12

)

$

(0.12

)

$

(0.10

)

$

(1.03

)

Weighted average basic shares outstanding

655,678,123

528,421,712

650,214,119

362,261,324

Weighted average diluted shares outstanding

655,678,123

528,421,712

650,214,119

362,261,324

(1)

Represents the total dollar value of customer purchases of goods
and services, excluding applicable taxes and net of estimated
refunds. Includes direct billings and third party and other
billings.

(2)

Represents change in financial measures that would have resulted
had average exchange rates in the reporting period been the same
as those in effect in the three months and year ended December 31,
2011.

Highlights

Largest sequential gross billings increase in Groupon history. All
categories contributed to the biggest sequential increase in platform
growth on an absolute dollar basis in Groupon's history.

Unit milestone. The Company surpassed the 50 million unit mark
for the first time in the fourth quarter 2012. Consolidated units,
defined as vouchers and products ordered before cancellations and
refunds, grew 21% year-over-year.

Seasonal strength in Groupon Goods. After a successful holiday
season, Goods has now reached an annual run rate of about $2.0 billion
in global billings, just five quarters after its launch.

Growing merchant selection and quality. As of the end of the
fourth quarter, the number of active deals in North America increased
almost 300% year-over-year to nearly 37,000.

Continued customer acquisition efficiencies. Marketing expense
per new customer improved 61% year-over-year in the fourth quarter
2012, enabling the reduction of overall marketing spend by 61%
compared with the fourth quarter 2011. As of December 31, 2012,
Groupon had 41.0 million active customers, an increase of 22%
year-over-year, with gross customer additions partially offset by
higher customer inactivations.

Substantial growth in mobile transaction activity. In January
2013, nearly 40% of North American transactions were completed on
mobile devices, an increase of 44% compared with January 2012. This
compares with about one third of transactions completed on mobile
devices in October 2012.

Launch of merchant services in 2012. Groupon launched a number
of services in 2012 to strengthen relationships with local businesses,
including Breadcrumb and Payments.

Outlook

Revenue for the first quarter 2013 is expected to be between $560
million and $610 million, an increase of between 0% and 9% compared with
first quarter 2012.

Operating (loss) income for the first quarter 2013 is expected to be
between $(10) million and $10 million, compared with $39.6 million in
the first quarter 2012. This outlook includes $30 million of stock-based
compensation, and assumes no acquisitions or investments, or material
changes in foreign exchange rates.

For the full year 2013, operating income is expected to increase
compared with 2012.

A conference call will be webcast live today at 4:00 p.m. CT / 5:00 p.m.
ET, and will be available on Groupon's investor relations website at http://investor.groupon.com.
This call will contain forward-looking statements and other material
information regarding the Company's financial and operating results.

Non-GAAP Financial Measures

In addition to financial results reported in accordance with generally
accepted accounting principles (GAAP), we have provided the following
non-GAAP financial measures in this release and the accompanying tables:
foreign exchange rate neutral operating results, free cash flow and
consolidated operating income (loss) excluding stock-based compensation
and acquisition-related expense (benefit), net. These non-GAAP financial
measures are presented to aid investors in better understanding
Groupon's performance. However, these measures are not intended to be a
substitute for those reported in accordance with GAAP. These measures
may be different from non-GAAP financial measures used by other
companies.

Foreign exchange rate neutral operating results show our current
period operating results as if foreign currency exchange rates had
remained the same as those in effect in the comparable period. These
measures are intended to facilitate comparisons to our historical
performance. For a reconciliation of foreign exchange rate neutral
operating results to our GAAP operating results, see "Reconciliation of
Foreign Exchange Rate Neutral Operating Results to U.S. GAAP Operating
Results" and "Supplemental Financial Information and Business Metrics"
included in the tables accompanying this release.

Free cash flow is a non-GAAP measure that comprises net cash
provided by operating activities less purchases of property and
equipment and capitalized software. We use free cash flow, and ratios
based on it, to conduct and evaluate our business because, although it
is similar to cash flow from operations, we believe that it typically
represents a more useful measure of cash flows because purchases of
fixed assets, software developed for internal use and website
development costs are necessary components of our ongoing operations.
Free cash flow is not intended to represent the total increase or
decrease in Groupon's cash balance for the applicable period. For a
reconciliation of free cash flow to cash flow from operations, see
''Reconciliation of Free Cash Flow to Net Cash Provided by Operating
Activities'' included in the tables accompanying this release.

Consolidated operating income (loss) excluding stock-based
compensation and acquisition-related expense (benefit), net is a
non-GAAP measure that comprises the consolidated total of the segment
operating income (loss) of our two segments, North America and
International. Stock-based compensation expense and acquisition-related
expense (benefit), net are excluded from segment operating income (loss)
that we report under GAAP for our segments. Stock-based compensation
expense is primarily a non-cash item. Acquisition-related expense
(benefit), net represents the change in the fair value of contingent
consideration arrangements related to business combinations. We use
consolidated operating income (loss) excluding stock-based compensation
and acquisition-related expense (benefit), net to allocate resources and
evaluate performance internally. For a reconciliation of consolidated
operating income (loss) excluding stock-based compensation and
acquisition-related expense (benefit), net to consolidated operating
income (loss), see ''Supplemental Financial Information and Business
Metrics'' included in the tables accompanying this release.

Note on Forward Looking Statements

The statements contained in this presentation that refer to plans and
expectations for the next quarter or the future are forward- looking
statements that involve a number of risks and uncertainties, and actual
results could differ materially from those discussed. The risks and
uncertainties that could cause our results to differ materially from
those included in the forward-looking statements include, but are not
limited to, volatility in our revenue and operating results; risks
related to our business strategy; responding to changes in the market;
effectively dealing with challenges arising from our international
operations; retaining existing customers and adding new customers;
retaining existing merchant partners and adding new merchant partners;
incurring expenses as we expand our business; competing against smaller
competitors and competitors with more financial resources than us;
maintaining favorable terms with our business partners; maintaining a
strong brand; managing inventory and order fulfillment; integrating our
technology platforms; managing refund risks; retaining our executive
team; litigation; regulations, including the CARD Act and regulation of
the Internet; tax liabilities; tax legislation; maintaining our
information technology infrastructure; security breaches; protecting our
intellectual property; handling acquisitions, joint ventures and
strategic investments effectively; seasonality; payment-related risks;
customer and merchant partner fraud; global economic uncertainty;
compliance with rules and regulations associated with being a public
company; and our ability to raise capital if necessary. We urge you to
refer to the factors included under the headings ''Risk Factors'' and
''Management's Discussion and Analysis of Financial Condition and
Results of Operations'' in the company's Annual Report on Form 10-K and
subsequent Quarterly Reports on Form 10-Q, copies of which may be
obtained by visiting the company's Investor Relations web site at http://investor.groupon.com
or the SEC's web site at www.sec.gov.
Groupon's actual results could differ materially from those predicted or
implied and reported results should not be considered an indication of
future performance.

You should not rely upon forward-looking statements as predictions of
future events. Although Groupon believes that the expectations reflected
in the forward-looking statements are reasonable, it cannot guarantee
that the future results, levels of activity, performance or events and
circumstances reflected in the forward-looking statements will be
achieved or occur. Moreover, neither the company nor any other person
assumes responsibility for the accuracy and completeness of the
forward-looking statements. The forward-looking statements reflect
Groupon's expectations as of February 27, 2013. Groupon undertakes no
obligation to update publicly any forward-looking statements for any
reason after the date of this presentation to conform these statements
to actual results or to changes in its expectations.

Groupon encourages investors to use its investor relations website as a
way of easily finding information about the company. Groupon promptly
makes available on this website, free of charge, the reports that the
company files or furnishes with the SEC, corporate governance
information (including Groupon's Global Code of Conduct), and select
press releases and social media postings.

We record intercompany cross-charges every period for services
provided by the United States to our international subsidiaries.
We updated our intercompany allocations for those charges during
the fourth quarter of 2012, which resulted in a one-time $8.5
million decrease to International Segment operating expenses
(reduction to International Segment operating loss) and a
corresponding increase to North America Segment operating expenses
(reduction to North America Segment operating income).

The following is a reconciliation of free cash flow to the most
comparable U.S. GAAP measure, "Net cash provided by operating
activities," for the three months and years ended December 31, 2012
and 2011, respectively:

Three Months Ended December 31,

Year Ended December 31,

2012

2011

2012

2011

Net cash provided by operating activities

$

65,717

$

169,077

$

266,834

$

290,447

Purchases of property and equipment and capitalized software

(40,034

)

(13,986

)

(95,836

)

(43,811

)

Free cash flow

$

25,683

$

155,091

$

170,998

$

246,636

Net cash used in investing activities

$

(52,753

)

$

(34,907

)

$

(194,979

)

$

(147,433

)

Net cash (used in) provided by financing activities

$

(6,495

)

$

746,913

$

12,095

$

867,205

Reconciliation of Foreign Exchange Rate Neutral Operating Results
to Revenue and (Loss) Income from Operations

(in thousands)

(unaudited)

The following is a reconciliation of foreign exchange rate neutral
operating results to the most comparable U.S. GAAP measures,
"Revenue" and "(Loss) Income from operations," for the three months
and year ended December 31, 2012:

The effect on the Company's consolidated statements of operations
from changes in exchange rates versus the U.S. Dollar for the three
months ended December 31, 2012 are as follows:

Three Months Ended December 31, 2012

Three Months Ended December 31, 2012

At Avg.

Exchange

At Avg.

Exchange

Q4 2011Rates (1)

RateEffect (2)

AsReported

Q3 2012Rates (3)

RateEffect (2)

AsReported

Revenue

$

646,013

$

(7,711

)

$

638,302

$

634,734

$

3,568

$

638,302

Loss from operations

$

(12,996

)

$

135

$

(12,861

)

$

(12,075

)

$

(786

)

$

(12,861

)

The effect on the Company's consolidated statements of operations
from changes in exchange rates versus the U.S. Dollar for the year
ended December 31, 2012 are as follows:

Year Ended December 31, 2012

Year Ended December 31, 2012

At Avg.

Exchange

At Avg.

Exchange

2011Rates (1)

RateEffect (2)

AsReported

Q4'11 - Q3'12Rates (3)

RateEffect (2)

AsReported

Revenue

$

2,408,588

$

(74,116

)

$

2,334,472

$

2,344,952

$

(10,480

)

$

2,334,472

Income from operations

$

106,102

$

(7,401

)

$

98,701

$

105,467

$

(6,766

)

$

98,701

(1)

Represents the outcome that would have resulted had average
exchange rates in the reported period been the same as those in
effect during the three months and year ended December 31, 2011.

(2)

Represents the increase or decrease in reported amounts resulting
from changes in exchange rates from those in effect in the
comparable period.

(3)

Represents the outcome that would have resulted had average
exchange rates in the reported period been the same as those in
effect during the three and twelve months ended September 30, 2012.

The following is a quarterly reconciliation of Operating (Loss)
Income, excluding stock-based compensation and acquisition-related
expense (benefit), net, to the most comparable U.S. GAAP measure,
"Operating (Loss) Income." (6)

The following is a trailing twelve months reconciliation of
Operating (Loss) Income, excluding stock-based compensation and
acquisition-related expense (benefit), net, to the most comparable
U.S. GAAP measure, "Operating (Loss) Income." (6)

The following is a quarterly reconciliation of foreign exchange
rate neutral Gross Billings growth from the comprable quarterly
periods of the prior year to reported Gross billings growth from the
comprable quarterly periods of the prior year.(7)

International Gross Billings, excluding FX

N/A

4,587

%

1,021

%

287

%

138

%

45

%

(4

)

%

9

%

FX Effect

N/A

470

%

94

%

(4

)

%

(11

)

%

(13

)

%

(8

)

%

(3

)

%

International Gross Billings

N/A

5,057

%

1,115

%

283

%

127

%

32

%

(12

)

%

6

%

Consolidated Gross Billings, excluding FX

1,378

%

859

%

465

%

198

%

108

%

47

%

11

%

25

%

FX Effect

27

%

57

%

31

%

(2

)

%

(5

)

%

(9

)

%

(6

)

%

(1

)

%

Condolidated Gross Billings

1,405

%

916

%

496

%

196

%

103

%

38

%

5

%

24

%

The following is a quarterly reconciliation of foreign exchange
rate neutral Revenue growth from the comprable quarterly periods of
the prior year to reported Revenue growth from the comprable
quarterly periods of the prior year.(7)

International Revenue, excluding FX

N/A

7,013

%

868

%

276

%

112

%

44

%

13

%

(14

)

%

FX Effect

N/A

696

%

79

%

(3

)

%

(10

)

%

(13

)

%

(10

)

%

(2

)

%

International Revenue

N/A

7,709

%

947

%

273

%

102

%

31

%

3

%

(16

)

%

Consolidated Revenue, excluding FX

1,332

%

858

%

401

%

188

%

95

%

53

%

38

%

31

%

FX Effect

26

%

57

%

25

%

(2

)

%

(6

)

%

(8

)

%

(6

)

%

(1

)

%

Consolidated Revenue

1,358

%

915

%

426

%

186

%

89

%

45

%

32

%

30

%

Cash Flow

Operating cash flow (TTM)

$

91,928

$

128,316

$

173,291

$

290,447

$

356,221

$

392,517

$

370,194

$

266,834

Purchases of property, equipment and capitalized software, net (TTM)

(24,780

)

(31,949

)

(38,414

)

(43,811

)

(45,932

)

(62,401

)

(69,788

)

(95,836

)

Free cash flow (TTM) (9)

$

67,148

$

96,367

$

134,877

$

246,636

$

310,289

$

330,116

$

300,406

$

170,998

Net cash (used in) provided by investing activities (TTM)

$

(55,510

)

$

(83,226

)

$

(124,301

)

$

(147,433

)

$

(149,583

)

$

(184,552

)

$

(177,133

)

$

(194,979

)

Net cash provided by (used in) financing activities (TTM)

$

142,549

$

125,404

$

130,593

$

867,205

$

746,824

$

771,404

$

765,503

$

12,095

Other Metrics:

Active Customers (10)

North America

8,213

11,039

12,823

14,084

14,876

15,121

15,983

17,215

International

7,163

11,998

16,083

19,658

21,974

22,925

23,542

23,834

Total Active Customers

15,376

23,037

28,906

33,742

36,850

38,046

39,525

41,049

TTM Gross Billings / Average Active Customer (11)

$

169

$

174

$

189

$

187

$

179

$

165

$

149

$

144

Headcount

Sales (12)

3,556

4,850

4,853

5,196

5,735

5,587

5,087

4,677

% North America

19

%

20

%

21

%

20

%

21

%

20

%

24

%

25

%

% International

81

%

80

%

79

%

80

%

79

%

80

%

76

%

75

%

Other

3,551

4,775

5,565

6,275

6,813

7,233

6,779

6,717

Total Headcount

7,107

9,625

10,418

11,471

12,548

12,820

11,866

11,394

(1)

Represents the total dollar value of customer purchases of goods
and services, excluding applicable taxes and net of estimated
refunds. Includes direct billings and third party and other
billings.

(2)

Third party revenue is related to sales for which the company acts
as a marketing agent for the merchant. This revenue is recorded on
a net basis. Direct revenue is related to the sale of products for
which the Company is the merchant of record. These revenues are
accounted for on a gross basis, with the cost of inventory
included in cost of revenue.

(3)

Cost of revenue is comprised of direct and indirect costs incurred
to generate revenue. Direct cost of revenue includes the purchase
price of consumer products, warehousing, shipping costs and
inventory markdowns. Third party cost of revenue includes
estimated refunds for which the merchant's share is not
recoverable. Other costs incurred to generate revenue are
allocated to cost of third party revenue, direct revenue and other
revenue in proportion to relative gross billings during the period.

(4)

Represents change in financial measures that would have resulted
had average exchange rates in the reported period been the same as
those in effect in the prior year period.

(5)

The weighted-average diluted shares outstanding is calculated
using the weighted-average number of common shares and, if
dilutive, potential common shares outstanding during the period.
Potential common shares consist of the incremental common shares
issuable upon the exercise of stock options and vesting of
restricted stock units and restricted shares, as calculated using
the treasury stock method.

(6)

Operating income excluding stock-based compensation and
acquisition-related activities is a non-GAAP financial measure.
The Company reconciles this measure to the most comparable U.S.
GAAP measure, ‘‘Operating Income," for the periods presented.

(7)

Foreign Exchange Rate neutral operating results are non-GAAP
financial measures. The Company reconciles these measures to the
most comparable U.S. GAAP measures, ‘‘Gross Billings" and
"Revenue," for the periods presented.

(8)

Year-over-year growth is unavailable for select international
growth measures as Groupon did not commence international
operations until the second quarter of 2010.

(9)

Free cash flow is a non-GAAP financial measure. The Company
reconciles this measure to the most comparable U.S. GAAP measure,
‘‘Net cash provided by operating activities," for the periods
presented. See "Reconciliation of Free Cash Flow to Net Cash
Provided by Operating Activities."

(10)

Reflects the total number of unique accounts who have purchased
Groupons during the trailing twelve months.

(11)

Reflects the total gross billings generated in the trailing twelve
months per average active customer over that period.

(12)

Includes inside and outside merchant sales representatives, as
well as sales support.

(13)

The definition, methodology, and appropriateness of each of our
supplemental metrics is reviewed periodically. As a result,
metrics are subject to removal and/or change.